Throughout history very few have been able to participate in the economic spoils of the frothy world of high end art. One could argue that the very same families or family offices that invest into Venture Capital Funds (as an asset class) are also amongst those that get to participate in high end art. How can financial innovators facilitate the ability for the redistribution of assets and their exposure to different customer segments. Or indeed help with the exposure to different asset classes previously difficult to “bundle”?
While Art is not a “security” it is certainly seen as a real world financial asset given the sky rocketing values associated with the works of key artists around the world. A Picasso selling at an auction at Christies recently sold for a record fetching $179m to a single buyer. Auctions in today’s world are a race where only “one horse wins”. But what if that ownership could have been split between a handful of wealthy families or indeed as we would like to see some part of it owned by a super consortia of mass affluent customers? This would for the first time create exposure to an asset class that has simply not been available to the masses.
Enter the world of Tokenisation. We have long believed that there will be some super use cases for the world of Blockchain. Past the consumer use case of CryptoKitties (congrats again Roham and the Axiom Zen team), which has been validated in part by startup luminary investors A16Z and USV, there is a world of B2B and B2C use cases that is starting to capture the attention of a world that can’t seem to move past the daily price of the top few cryptocurrencies. By this we refer to what could herald a new era of securitisation of any physical, non-fungible asset, such as art. A move that could at one level of the market create an unprecedented world of never seen before financial services products. Products with mass appeal and that could extend the hand of “unreachable passion investments” to the crowd.
Invest £10,000 into a Hirst any one?
The world of passion investments and physical assets has long been crying out for innovation. In Asia in particular there is a real bent towards the ownership of real estate, but what if there was a product that mixed real estate with art and that too was further de-risked by a clever composite of tokenised assets across a range of geographies? I am taking about something akin to a Composite product for physical assets through tokens. A world where investing £15,0000, the price UBS suggests as the entry ticket into their online mass affluent focused product Smart Wealth, could give exposure to a basket of art, real estate and why not throw in some classic cars for good measure too.
The remarkably pliable and open architecture of the blockchain allows us to do a lot with very little. The use of specialist tokens like ERC721 tokens has allowed people to own digital collectibles. An asset class which we believe is likely to grow in value as it is not replicable. The Ethereum contracts make sure that these assets can only be owned by one person and are unique to that asset and the owner. You guessed right if you had by now associated ERC721 as the token behind the incredibly successful CryptoKitties. These tokens however unlike their lower energy and divisible cousins the ERC223 are not divisible. So lets come back to the tokenisation discussion. If you wanted to tokenise art or any physical asset as long as you could provide clarity on custody there is a great case for tokenisation.
Enter the old guard, the custodians. Here lies the opportunity for forward thinking auction houses and investment boutiques that want to facilitate the investment of fiat currency or crypto for that matter into the world of art. Work with AssetVault to help channel the new wealth into art and better yet change the face of investment portfolios for the mass affluent market forever.
Smart contracts are likely to make custody extend to the world of museums and even private retail collections where IOT tied into location will be able to ensure that the custodians keep assets where they were intended or certainly within an acceptable range of parameters.
Whether its investment, lending, the case for co-ownership or indeed legacy management watch out for the tsunami of digital financial and technology innovation that is bound to put a lot of players on their toes, upend some old business models and finally increase the size of the pie for all that are sitting at the Financial Services table.
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